A Tale of Two SGOs

While hard facts about the Alabama Accountability Act and the scholarship programs it has created are not plentiful, what we do have paints a quite different picture of the two leading scholarship granting organizations (SGO).

One is the Alabama Opportunity Scholarship Fund created by former governor Bob Riley. The other is Scholarships for Kids, Inc. Both are headquartered in Birmingham. Both have six-member boards. The AOSF board has three members from Florida, while all SFK board members are from Alabama. (The head of Florida’s largest SGO is Step Up for Students. The chair of its board also serves on the Riley board and paperwork filed with the IRS shows that the Florida organization actually is the “direct controlling entity” for AOSF.)

The summary from the state revenue department says in 2013, all SGOs raised a total of $24,787,079. Of the eight groups in the report, the Alabama Opportunity Scholarship Fund raised $17,825,594 from 25 donors. Scholarships for Kids received $6,345,343 from 753 donors. So while one averaged $8,426 per contribution, the other averaged $713,023. (Info from Step Up for Students shows that more than $14 million of the money raised by the Riley group came from only two donors.)

Obviously these two SGOs were fishing in different ponds. This was borne out starkly in 2014.

The recently-released summary for 2014 says that five SGOs raised $13,311,357. (The cap for contributions for 2013 and 2014 was $25 million. This was raised to $30 million in the last legislative session even thought we only raised 52 percent of the cap last year. In other words, we could not jump over the existing bar–so we raised it higher.)

Last year the Riley SGO only collected $652,390 saying the decline was caused by litigation. (A Montgomery circuit court ruled AAA unconstitutional on May 28, 2014. This was overturned by the Alabama Supreme Count on March 2, 2015) In fact, an internal Riley SGO memo states: Because of the lawsuit, donors waited until theAlabama Supreme Court ruled before committing this donations. The only problem with this argument is that the law suit did not impact Scholarships for Kids which increased donations from $6.3 million in 2013 to $12.1 million last year. Evidently their 650 donors in 2014 did not know about the litigation.

So as of Dec. 31, 2014 AOSF had raised $18,477,984 and SFK $18,490,710 in 2013 and 2014. Here is where the math stops working. The law says that students who receive scholarships are eligible to continue receiving them until they graduate or reach 19 years of age. So in order to renew scholarships, minus those who graduated in the past year, an SGO must raise as much money year after year as they spent on scholarships their first year of giving them.

The Riley SGO spent $16,899,434 on 3,608 scholarships in 2014. That’s an average of $4,683. Let’s say ten percent of the AOSF recipients gradated. This leaves 3.248 students eligible to have their scholarship renewed. This means $15,210,384 is needed if the average scholarship remains the same as in 2014. But at year’s end they only had $699.895 in the bank–not nearly enough to cover what was needed for renewals.

By comparison, Scholarships for Kids spent $6,223,841 for 2,076 scholarships (average of $2,995) last year and ended the year with a balance of $11,406.718.

All of this is even more interesting in light of the internal memo mentioned earlier that states: These funds (for scholarships) must be in hand by May 1, 2015 so that scholarships can be awarded for the 2015-2016 School Year. AOSF cannot commit to a student without having funds to cover an entire year.

As of June 28, 2015, all SGOs have raised $11,780,651 this year. Which means that even if the Riley group raised it ALL, which is highly unlikely, they are still short of needed money. And May 1 is now two months ago.

One has to say that one of these groups is in a strong financial situation and should easily be able to honor its existing commitments, the other, not so much. One can also conclude that the philosophies driving these two groups are very dissimilar.

Which is probably why a mother I know whose four children received AOSF scholarships last year is still waiting to hear if they will be renewed.